MODULE 1: range of analytical information designed for use in

management audit or legislative review; furnish

LESSON 1: INTRODUCTION
information regarding the production of income and the
Government accounting encompasses the processes of
investment in capital items which is of value in fiscal
analyzing, recording, classifying, summarizing and
and economic planning; enable tighter accounting
communicating all transactions involving the receipt
control to be exercised over agencies’ financial
and disposition of government funds and property, and
relationship with the Treasury; permit a more simplified
interpreting the results thereof.
preparation of trial balances and a simpler and more
Objectives of government accounting orderly process of national consolidation; and facilitate
the application of mechanized accounting procedures
Government accounting shall aim to for more effective protection against error and
(1) produce information concerning past operations and irregularity and yielding economies in operation.
present conditions;

(2) provide a basis for guidance for future operations; The general ledger.
(3) provide for control of the acts of public bodies and The government accounting system shall be on a double
officers in the receipt, disposition and utilization of entry basis with a general
funds and property; and
ledger in which all financial transactions are recorded.
(4) report on the financial position and the results of
operations of government agencies for the information Subsidiary records shall be kept where necessary.
of all persons concerned.

Terminology and classification

Keeping of accounts.
A common terminology and classification shall be used
The accounts of an agency shall be kept in such detail as consistently throughout the budget, the accounts and
is necessary to meet the the financial reports.

needs of the agency and at the same time be adequate

to furnish the information
Accounts classification
needed by fiscal or control agencies of the government.
To permit effective budgetary control and to establish
uniformity in financial reports, accounts shall be
classified in balanced fund groups. The groups for each
The highest standards of honesty, objectivity and fund shall include all accounts necessary to set forth its
consistency shall be observed in the keeping of operations and condition. All
accounts to safeguard against inaccurate or misleading
information. financial statements shall follow this classification.

Chart of accounts. Budgetary control accounts

The chart of accounts for government agencies shall be The general accounting system shall include budgetary
control accounts for revenues, expenditures and debt.
prescribed by the Commission and shall be so designed
as to permit agency heads to review their activities
according to selected areas of responsibility; allow for a
Accounting for unrealized revenues.
clearer definition of obligation accounting leading to
more precise budgetary control; provide for a wider
Estimated revenues which remain unrealized at the Depository funds” comprises funds over which the
close of the fiscal year shall not be booked or credited officer accountable therefor may retain control for the
to the unappropriated surplus or any other account. lawful purposes for which they came into his
possession. It embraces moneys in any and all
depositories.
Accounting for obligations and expenditures
Depository” means any financial institution lawfully
All lawful expenditures and authorized to receive

obligations incurred during the year shall be taken up in government moneys upon deposit.
the accounts of that year.
“Resources” refers to the actual assets of any agency of
the government such as

Definition of internal control. cash, instruments representing or convertible to money,

receivables, lands,
Internal control is the plan of organization and all the
coordinate methods and measures adopted within an buildings, as well as contingent assets such as estimated
organization or agency to safeguard its assets, check the revenues applying to the current fiscal period not
accuracy and reliability of its accounting data, and accrued or collected and bonds authorized and
encourage adherence to prescribed managerial policies. unissued.

Government agency” or “agency of the government,” or

“agency” refers to any
A. DEFINITION OF TERMS
department, bureau or office of the national
“Fund” is a sum of money or other resources set aside government, or any of its branches
for the purpose of carrying out specific activities or
attaining certain objectives in accordance with special and instrumentalities, or any political subdivision, as
regulations, restrictions, or limitations, and constitutes well as any governmentowned
an independent fiscal and accounting entity.
or controlled corporation, including its subsidiaries, or
“Government funds” includes public moneys of every other self-governing
sort and other resources
board or commission of the government.
pertaining to any agency of the

government.
B. FUNDAMENTAL PRINCIPLES
“Revenue funds” comprises all funds derived from the
No money shall be paid out of any public treasury or
income of any agency of the government and available
depository except in pursuance of an appropriation law
for appropriation or expenditure in accordance with
or other specific statutory authority.
law.
Government funds or property shall be spent or used
“Trust funds” refers to funds which have come officially
solely for public purposes.
into the possession of any
Trust Funds shall be available and may be spent only for
agency of the government or of a public
the specific purpose for which the trust was created or
officer as trustee, agent, or administrator, the funds received.

or which have been received for the Fiscal responsibility shall, to the greatest extent, be
shared by all those exercising authority over the
fulfillment of some obligation. financial affairs, transactions, and operations of the
government

agency.
Disbursements or disposition of government funds or Assets – are resources controlled by an entity as
property shall invariably bear the approval of the a result of past events, and from which future economic
proper officials. benefits or service potential are expected to flow to the
entity.
Claims against government funds shall be supported
with complete documentation. Contributions from owners – means future
economic benefits or service potential that have been
All laws and regulations applicable to financial
contributed to the entity by parties external to the
transactions shall be faithfully adhered to.
entity, other than those that result in liabilities of the
Generally accepted principles and practices of entity, that establish a financial interest in the net
accounting as well as of sound management and fiscal assets/equity of the entity.
administration shall be observed, provided that they do
Distributions to owners – means future
not contravene existing laws and regulations.
economic benefits or service potential distributed by
the entity to all or some of its owners, either as a return
on investment or as a return of investment
LESSON 2: LEGAL BASIS
Entity – refers to a government agency,
Legal Basis department or operating/field unit. It may be referred
“The Commission on Audit shall have exclusive to in this GAM as an agency.
authority, subject to the limitations in this Article, to Expenses – are decreases in economic benefits
define the scope of its audit and examination, establish or service potential during the reporting period in the
the techniques and methods required therefor, and form of outflows or consumption of assets or
promulgate accounting and auditing rules and incurrence of liabilities that result in decreases in net
regulations, including those for the prevention and assets/equity, other than those relating to distributions
disallowance of irregular, unnecessary, excessive, to owners.
extravagant, or unconscionable expenditures, or uses of
government funds and properties". Government Budget – is the financial plan of a
government for a given period, usually for a fiscal year,
which shows what its resources are, and how they will
Government Accounting Manual be generated and used over the fiscal period.

This Manual presents the basic accounting policies and Liabilities – are firm obligations of the entity
principles in accordance with the Philippine Public arising from past events, the settlement of which is
Sector Accounting Standards (PPSAS) adopted thru COA expected to result in an outflow from the entity of
Resolution No. 2014-003 dated January 24, 2014 and resources embodying economic benefits or service
other pertinent laws, rules and regulations. It includes potential.
the Revised Chart of Accounts (RCA) prescribed under Net assets/equity – is the residual interest in
COA Circular No. 2013-002 dated January 30, 2013, as the assets of the entity after deducting all its liabilities.
amended; the accounting procedures, books, registries,
records, forms, reports, and financial statements; and Revenue – is the gross inflow of economic
illustrative accounting entries. benefits or service potential during the reporting period
when those inflows result in an increase in net
assets/equity, other than increases relating to
Definition of Terms. contributions from owners.

Accrual basis – means a basis of accounting Revenue funds – comprise all funds derived
under which transactions and other events are from the income of any agency of the government and
recognized when they occur (and not only when cash or available for appropriation or expenditure in
its equivalent is received or paid). accordance with law.
 Expenditures of government funds or uses of
government property in violation of law or regulations
Responsibility over Government Funds and Property
shall be a personal liability of the official or employee
It is the declared policy of the State that all resources of found to be directly responsible therefor.
the government shall be managed, expended or utilized
Every officer accountable for government funds
in accordance with laws and regulations, and
shall be liable for all losses resulting from the unlawful
safeguarded against loss or wastage through illegal or
deposit, use, or application thereof and for all losses
improper disposition, with a view to ensuring efficiency,
attributable to negligence in the keeping of the funds.
economy and effectiveness in the operations of
government. The responsibility to take care that such No AO shall be relieved from liability by reason
policy is faithfully adhered to rests directly with the of his having acted under the direction of a superior
chief or head of the government agency concerned. officer in paying out, applying, or disposing of the funds
or property with which he is chargeable, unless prior to
Fiscal responsibility shall, to the greatest extent,
that act, he notified the superior officer in writing of the
be shared by all those exercising authority over the
illegality of the payment, application, or disposition.
financial affairs, transactions, and operations of the
government agency When a loss of government funds or property
occurs while they are in transit or the loss is caused by
The head of any agency of the government is
fire, theft, or other casualty or force majeure, the
immediately and primarily responsible for all
officer accountable therefor or having custody thereof
government funds and property pertaining to his
shall immediately notify the Commission or the auditor
agency. Persons entrusted with the possession or
concerned and, within 30 days or such longer period as
custody of the funds or property under the agency head
the Commission or auditor may in the particular case
shall be immediately responsible to him, without
allow, shall present his application for relief, with the
prejudice to the liability of either party to the
available supporting evidence.
government.

Fundamental Principles for Revenue.

Accountability over Government Funds and Property
Unless otherwise specifically provided by law,
Every officer of any government agency whose
all revenues accruing to an entity by virtue of the
duties permit or require the possession or custody of
provisions of existing law, orders and regulations shall
government funds or property shall be accountable
be deposited/remitted in the National Treasury (NT) or
therefor and for the safekeeping thereof in conformity
in any duly authorized government depository, and shall
with law.
accrue to the General Fund (GF) of the NG.
Transfer of government funds from one officer
Except as may otherwise be specifically
to another shall, except as allowed by law or regulation,
provided by law or competent authority, all moneys and
be made only upon prior direction or authorization of
property officially received by a public officer in any
the Commission or its representative.
capacity or upon any occasion must be accounted for as
When government funds or property are government funds and government property.
transferred from one AO to another, or from an
outgoing officer to his successor, it shall be done upon
properly itemized invoice and receipt which shall Amounts received in trust and from business-
invariably support the clearance to be issued to the type activities of government may be separately
relieved or outgoing officer, subject to regulations of recorded and disbursed in accordance with such rules
the Commission. and regulations as may be determined by a Permanent
Committee composed of the Secretary of Finance as
Chairman, and the Secretary of Budget and
Liability over Government Funds and Property Management and the Chairman, COA, as members.
 Receipts shall be recorded as revenue of Each entity maintains budget registries which
Special, Fiduciary or Trust Funds or Funds other than are reconciled with the budget records maintained by
the GF, only when authorized by law as implemented by the DBM and the Government Accountancy Sector
rules and regulations issued by the Permanent (GAS), COA.
Committee.
The COA, through the GAS:
No payment of any nature shall be received by a
maintains budget records showing the overall
collecting officer without immediately issuing an official
approved budget of the NG and its
receipt in acknowledgement thereof. The receipt may
execution/implementation;
be in the form of postage, internal revenue or
documentary stamps and the like, officially numbered consolidates the FSs and budget accountability
receipts, subject to proper custody, accountability, and reports of all NGAs and the BTr with COA’s records to
audit. come up with an Annual Financial Report (AFR) for the
NG
Where mechanical devices (e.g. electronic
official receipt) are used to acknowledge cash receipts,
the COA may approve, upon request, exemption from
the use of accountable forms. Objectives of General Purpose Financial Statements.

At no instance shall temporary receipts be The objectives of general purpose financial statements
issued to acknowledge the receipt of public funds. (GPFSs) are to provide information about the financial
position, financial performance, and cash flows of an
entity that is useful to a wide range of users in making
and evaluating decisions about the allocation of
LESSON 3: FINANCIAL REPORTING SYSTEM
resources. Specifically, the objectives of general
Keeping of the General Accounts. purpose financial reporting in the public sector are to
provide information useful for decision-making, and to
The COA shall keep the general accounts of the
demonstrate the accountability of the entity for the
Government and, for such period as may be provided by
resources entrusted to it.
law, preserve the vouchers and other supporting papers
pertaining thereto.

Responsibility for Financial Statements

Financial Reporting System for the National for individual entity/department FSs – the head
Government. of the entity/department central office (COf) or regional
office (RO) or operating unit (OU) or his/her authorized
The financial reporting system of the Philippine
representative jointly with the head of the
government consists of accounting system on accrual
finance/accounting division/unit; and
basis and budget reporting system on budget basis
under the statutory responsibility of the NGAs, Bureau for department/entity FSs as a single entity –
of the Treasury (BTr), Department of Budget and the head of the entity/department COf jointly with the
Management (DBM), and the COA. head of the finance unit.

Each entity of the National Government (NG) Components of General Purpose Financial Statements.
maintains complete set of accounting books by fund
Statement of Financial Position (Annex A);
cluster which is reconciled with the records of cash
transactions maintained by the BTr. Statement of Financial Performance (Annex B);
The BTr accounts for the cash, public debt and Statement of Changes in Net Assets/Equity (Annex C);
related transactions of the NG.
Statement of Cash Flows (Annex D);
 Statement of Comparison of Budget and Actual
Amounts (Annex E); and
Components of Budget and Financial Accountability
Notes to the Financial Statements, comprising a Reports.
summary of significant accounting policies and other
Quarterly Physical Report of Operation (QPRO)
explanatory notes. (Annex F)
– BAR No. 1

Statement of Appropriations, Allotments,

Books of Accounts and Registries. Obligations, Disbursements and Balances (SAAODB) –
FAR No. 1
Journals
Summary of Appropriations, Allotments,
General Journal (Appendix 1)
Obligations, Disbursements and Balances by Object of
Cash Receipts Journal (Appendix 2) Expenditures (SAAODBOE) – FAR No. 1-A

Cash Disbursements Journal (Appendix 3) List of Allotments and Sub-Allotments (LASA) –

FAR No. 1-B
Check Disbursements Journal (Appendix 4)
Statement of Approved Budget, Utilizations,
Ledgers Disbursements and Balances (SABUDB) – FAR No. 2 (for
General Ledgers (Appendix 5) Off-Budget Fund)

Subsidiary Ledgers (Appendix 6) Summary of Approved Budget, Utilizations,

Disbursements and Balances by Object of Expenditures
Registries (SABUDBOE) – FAR No. 2-A (for Off-Budget Fund)
Registries of Revenue and Other Receipts Aging of Due and Demandable Obligations
Registry of Appropriations and Allotments (ADDO) – FAR No. 3

Registries of Allotments, Obligations and Disbursements Monthly Report of Disbursements (MRD) – FAR
No. 4
Registries of Budget, Utilization and Disbursements
Quarterly Report of Revenue and Other
Receipts (QRROR) – FAR No. 5
Fund Accounting

Code Description Fair Presentation.

01 Regular Agency Fund The FSs shall present fairly the financial position,
financial performance and cash flows of an entity. Fair
02 Foreign Assisted Projects Fund
presentation requires the faithful representation of the
Special Account-Locally Funded/Domestic effects of transactions, other events, and conditions in
Grants accordance with the definitions and
Fund recognition criteria for assets, liabilities, revenue, and
expenses set out in PPSAS. The application of PPSAS,
Special Account-Foreign Assisted/Foreign
with appropriate disclosures, if necessary, would result
Grants
in fair presentation of the FS.
Fund

Internally Generated Funds

Compliance with PPSASs.
Business Related Funds
An entity whose financial statements comply with
Trust Receipts PPSASs shall make an explicit and unreserved statement
of such compliance in the notes. Financial statements a PPSAS except when offsetting reflects the substance
shall not be described as complying with PPSASs unless of the transaction or other event.
they comply with all the requirements of PPSASs.
Inappropriate accounting policies that do not comply
with PPSAS are not rectified either by disclosure of the Comparative Information.
accounting policies used, or by notes or explanatory
material. Comparative information shall be disclosed with respect
to the previous period for all amounts reported in the
FSs. Comparative information shall be included for
narrative and descriptive information when it is relevant
Departure from PPSAS
to an understanding of the current period’s FSs.
In the event that Management strongly believes that
compliance with the requirement of PPSAS would result
in misleading presentation that it would contradict the Statement of Financial Position
objective of the FSs set forth in PPSAS, the entity may
depart from that requirement if the relevant regulatory Structure and Content. The FSs and each component
framework allows, or otherwise does not prohibit, such shall be identified clearly and distinguished from other
a departure. information in the same published document.

An entity shall present current and non-current assets,

as well as current and non-current liabilities, as
Going Concern. separate classifications on the face of the Statement of
Financial Position (SFP).
The FSs shall be prepared on a going concern basis
unless there is an intention to discontinue the entity
operation, or if there is no realistic alternative but to do
so. Statement of Financial Performance.

The Statement of Financial Performance (SFPer) shall

include line items that present the revenue, expenses
Consistency of Presentation and net surplus or deficit for the period.
The presentation and classification of items in the FSs
shall be retained from one period to the next unless
laws, rules and regulations, and PPSAS require a change Statement of Changes in Net Assets/Equity.
in presentation. Net Income or Deficit for the period;

Each item of revenue and expenses for the

Materiality and Aggregation period that, as required by Standards, is recognized
directly in net assets/equity, and the total of these
Each material class of similar items shall be presented items;
separately in the financial statements. Items of a
dissimilar nature or function shall be presented Total revenue and expenses for the period;
separately unless they are immaterial. If a line item is For each component of net assets/equity separately
not material, it is aggregated with other items either on disclosed, the effects of changes in accounting policies
the face of FSs or in the Notes to the FSs. and corrections of errors recognized in accordance with
PPSAS 3-Accounting Policies, Changes in Accounting
Estimates and Errors.
Offsetting

Assets and liabilities, and revenue and expenses shall

not be allowed to offset unless required or permitted by Statement of Cash Flows
The Statement of Cash Flows (SCF) provides information the ability of an entity to benefit from the asset
to users of FSs a basis to assess the ability of the entity and to deny or regulate the access of others to that
to generate cash and cash equivalents and to determine benefit.
the entity’s utilization of funds. This also provides
an entity can, depending on the nature of the
information on how the entity generates income
asset, exchange it, use it to provide goods or services,
authorized to be used in their operation and its
exact a price for others’ use of it, use it to settle
utilization.
liabilities, hold it, or perhaps even distribute it to
owners.

Statement of Comparison of Budget and Actual possession or ownership of an object or right

Amounts. would normally be synonymous with control over the
future economic benefits embodied in the right or
A comparison of budget and actual amounts will
object.
enhance the transparency of financial reporting in
government. This shall be presented by government
agencies as a separate additional financial statement
Indicators of past event
referred in this Manual as the Statement of Comparison
of Budget and Actual Amounts (SCBAA). the specification of a past event differentiates
assets from intentions to acquire assets, which are not
to be recognized.
Notes to Financial Statements.
a transaction or event giving rise to control of
The Notes to FSs contain information in addition to that the future economic benefits must have occurred.
presented in the SFP, SFPer, SCNA/E, SCF and SCBAA.
Notes provide narrative descriptions or disaggregation
of items disclosed in those FSs and information about
items that do not qualify for recognition in those
statements.

Qualitative Characteristics of Financial Reporting.

An entity shall present information including accounting

policies in a manner that meets a number of qualitative
characteristics such as understandability, relevance,
materiality, reliability and comparability.

Key Features of Assets

the benefits must be controlled by the entity;

the benefits must have arisen from a past

event; and

future economic benefits or service potential

must be expected to flow to the entity.

Indicators of control of the benefits by the entity